The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday urged to forget about “juicing the economy” prior to the upcoming general election, an outspoken businessman urging it to largely finance hurricane relief from its existing Budget.

Dionisio D’Aguilar, a former Chamber of Commerce president, while acknowledging that the Christie administration was between a ‘rock and a hard place’, warned it against “blowing the Budget wide open”.

He emphasised that this would inevitably attract the credit rating agencies’ attention and result in another downgrade, adding that a drop to ‘junk’ status would finish the Bahamas.

Pointing out that successive governments, like many ordinary Bahamians, had “failed to save for a rainy day”, Mr D’Aguilar echoed previous warnings urging the Government not to impose new or increased taxes to finance Matthew restoration.

With the Bahamas desperate for positive GDP expansion, he argued that increased taxation would only exacerbate the negative economic growth suffered between 2014-2015.

“If the Government spends what they need to spend on hurricane relief, then they will almost undoubtedly blow the Budget even wider than it is now, and we will almost certainly face a downgrade,” Mr D’Aguilar told Tribune Business. “It becomes almost a certainty.

“The Government wants to help people but they’ve never saved for it. They’ve never saved for a rainy day. Now it’s come home to roost.

“It’s unfortunate. None of the country saves for a rainy day. We’re Bahamian. We live for the moment. We die with nothing in the bank. When we get a catastrophic hit like Hurricane Matthew, that’s what happens.

Mr D’Aguilar, who is rumoured to be a potential FNM candidate at the next general election, said the Government now had to show tremendous fiscal “responsibility” by financing Matthew repair costs “without blowing the Budget”.

This, he suggested, would require the Government to redeploy already-budgeted spending towards hurricane relief, postpone non-essential contracts and projects, and cut spending across all departments and ministries by between 10-15 per cent.

“They’re betwixt and between,” Mr D’Aguilar said of the Government. “They need to stop frivolous spending. Next year, no carnival. Put that to hurricane relief. If they need to raise $200 million, that’s 5 per cent right there.

“All the money they were going to use to juice the economy and people before the election, that’s got to go. It has to help people with repairs, and go to duty relief and tax exemptions, and cutting spending will pay for that.

“The Minister of Finance is pulling out what little hair he has on his head to try and work some magic. But short-term juicing of the economy will have long-term repercussions. We must avoid a downgrade at all costs. If we get to ‘junk’, we’re finished.”

Both Moody’s and Standard & Poor’s (S&P) currently have the Bahamas’ sovereign creditworthiness rated one notch above so-called ‘junk’ status, meaning that a further downgrade will drop the nation to this level.

Loss of investment grade status will both harm the Bahamas’ reputation in the eyes of investors, plus raise its borrowing costs on international capital markets. The country is also in the midst of a six-24 month window where S&P has warned there is a ‘one in three’ chance of a downgrade.

Mr D’Aguilar’s stance reflects similar calls by FNM deputy leader, K P Turnquest, for it to use the various ‘contingencies’ allocated to various ministries and departments amid its $1.7 billion recurrent expenditure.

However, Prime Minister Perry Christie yesterday told the House of Assembly that insufficient funds existed within the 2016-2017 Budget to finance all costs related to Hurricane Matthew restoration and repairs.

Mr D’Aguilar, meanwhile, urged Prime Minister Perry Christie and his Cabinet not to follow through on previously ‘floated’ proposals to introduce new or increased taxes to finance storm relief, even on a temporary basis.

The Government yesterday appeared to be backing away from such plans, but Mr D’Aguilar told Tribune Business: “You can’t tax your way out of this problem.

“You need to grow this economy, and they’re coming up with more and more reasons to spend money and tax people. That’s exacerbating the negative GDP we’ve been experiencing. No to tax; just spend our money better.”

Key to achieving better taxpayer ‘value for money’, Mr D’Aguilar said, was the passage of a Fiscal Responsibility Act and Freedom of Information Act.

The former, he added, would require governments to be prudent in their use of public money, while the latter would enable Bahamians to “see what is going on”.

Mr D’Aguilar’s concerns were echoed by Rick Lowe, the Nassau Institute executive, who told Tribune Business: “You don’t tax yourself to prosperity.”

Arguing that ‘temporary taxes’ always seemed to become permanent, he added: “These taxes they say are for one particular thing, without accountability it makes no sense.

“They see it [taxes] as an easy way to get more money, but it will be ever so damaging to the economy to implement new taxes. They’ve got to find ways to encourage the business community, rather than discourage it further.”

Mr Lowe estimated that the Government had taken in nearly $1 billion in Value-Added Tax (VAT) revenues since the tax’s implementation in early 2015, yet it was still running an annual deficit and increased national debt.

“You can’t keep on taxing people more and more, and expect the economy to go on growing,” he told Tribune Business.

“If I was the Minister of Finance, I’d be meeting with all the permanent secretaries to see where I can hold the line, where can we not spend.”